Class Action

Class Action Defense Cases–Blough v. Holland Realty: Ninth Circuit Affirms Summary Judgment Of Antitrust Class Action Claims Because There Was No Adverse Effect On Competition In The Tied Product Market

By Michael J. Hassen

District Court did not Err in Granting Summary Judgment on Class Actions’ Claims Alleging Antitrust Violations in the Form of Unlawful Tying Arrangements in the Sale of Undeveloped Properties because Challenged Conduct did not Adversely Affect Competition in the Market Ninth Circuit Holds

Plaintiffs filed four separate putative class actions against several defendants alleging “that various realtors representing developers tied the sale of undeveloped lots to services and commissions for developed property in violation of the federal and state anti-trust laws.” Blough v. Holland Realty, Inc., 574 F.3d 1084, 1087 (9th Cir. 2009). According to the class action complaints, “Buyers entered into agreements with homebuilders to purchase developed lots (an undeveloped lot with a newly-constructed home) in different subdivisions in the Boise, Idaho area. Realtors represented the developers of the subdivisions in allocating lots to the homebuilders. The price of the developed lot that Buyers paid to the homebuilders included a commission (or referral fee) for Realtors, typically calculated as a percentage of the total price of the developed lot. It is apparently the custom in Idaho for the seller, rather than the buyer, to pay the commission owed to the listing agent and to the selling agent (the agent assisting the buyer's search for a property) when a transaction closes. Buyers claim the Realtors engaged in a per se unlawful tying arrangement when they tied the sale of undeveloped lots (the tying product) to their services and commissions on the sale of developed lots (the tied product).” Id., at 1088. Plaintiffs’ lawyer moved the district court to certify the litigation as a class action: the district court granted class action treatment for purposes of class-wide adjudication of the tying claim. Id. The district court “identified the tying product as sales of undeveloped lots and the tied product as Realtors' services, i.e., commissions, with regard to sale of developed lots.” Id. As the Circuit Court explained, “The class consists of those who: (1) bought undeveloped lots in subdivisions where Realtors had the exclusive right to market lots on behalf of the developer; (2) were required to build a house on the lot in order to buy the lot; and (3) were required to pay Realtors a commission based on the cost of the lot plus the actual or estimated cost of the house in order to buy the lot.” Id. Defense attorneys for the realtors moved for summary judgment, and plaintiffs sought additional discovery “into other members of the class to determine whether any of them wanted to buy the services of a listing agent from someone other than Realtors.” Id. The district court denied plaintiff’s request for further discovery “on the ground that they had shown no plausible reason to believe that other members of the class (unlike themselves) would want to purchase the tied product from anyone else,” and granted defendants’ motion for summary judgment “concluding that Buyers failed to show that the alleged tying practice ‘affects a not insubstantial volume of commerce in the tied product market.’” Id. (citation omitted). The Circuit Court explained at pages 1086-87, “Applying the doctrine of ‘zero foreclosure,’ the district court granted summary judgment to the realtors because there is no market for listing and referral services among potential buyers of newly-constructed houses, thus no competition in the tied market to be harmed.” Plaintiffs appealed, and the Ninth Circuit affirmed.

Full post as published by Class Action Defense Blog on September 16, 2009 (boomark / email).